A recent post from cryptocurrency exchange Coinbase indicates that the vast majority of US remittance fees for international transfers would not apply to similar transactions made with cryptocurrencies.
According to the exchange’s research: “The average US fee rate of 6.18% means that the average annual American spend is probably close to $12 billion in remittance fees.” The post goes on to state that the average transaction time for such remittances ranges from one to 10 days, while similar cryptocurrency transactions typically take around 10 minutes.
Remittance payments represent something of a “double whammy” for international transactions, as they typically require both a remittance fee and a conversion fee to exchange between currencies.
However, cryptocurrency transactions usually cost significantly less. According to Coinbase, Bitcoin (BTC) transaction fees are around $1.50 and Ether (ETH) $0.75. These fees are potentially much lower than traditional remittance fees, which, according to the World Bank, average 6.3%. According to Coinbase estimates, sending money via BTC and ETH is 96.7% cheaper than traditional remittance methods.
While the report does not appear to have the rigor of a scientific study, it sheds light on some of the difficulties faced by the more than 1 billion people who depend on remittances and how global adoption of cryptocurrency could change the financial landscape. US senders, for example, were responsible for 94.9% of all remittances sent to Mexico in 2022, according to the Wilson Center, a Washington-based research institute.
It is estimated that approximately 6% of American adults currently own some form of cryptocurrency, with adoption rates continuing to rise since at least 2019 – with the exception of two quarters of decline in late 2022. If these fees can be increased or maintained as the status quo, a creeping exodus from traditional remittances to international cryptocurrency-based transactions could eventually alter how the global financial industry handles the associated fees.
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